INCOME TAX ACT, 1961

Sections 147 & 148

Reassessment - Validity - Reopening based on objection raised by audit party on allowability of depreciation on DVN -

Assessee company was engaged in the business of manufacture and assembly of automobile parts/components. AO reopened assessment on the reasoning that audit party expressed its views/opinion that Dealer and Vendor Network ('DVN') was not a 'commercial right' and thus, allowance of depreciation by AO was erroneous and thus ought to be withdrawn. Assessee challenged validity of reopening. Held: Audit objection was in excess of its jurisdiction inasmuch as it decided on the legality of depreciation on DVN. In other words, rather than furnishing new tangible material to AO and leaving it open to AO to decide for himself whether the circumstances and material warranted reassessment, audit party, instead, issued directions which were more in the nature of direction/command as to the manner in which reassessment and claim of depreciation ought to be dealt with by AO. It clearly amounted to transgression and usurping of powers vested with AO by a body/unit not vested with the power of assessment/reassessment which was impermissible. The opinion of the Audit party on a question/evaluation of law could not be the basis for reopening, more so, when admittedly AO had already examined the issue of depreciation during the course of assessment under section 143(3). Therefore, reassessment was set aside.

Relied :Commissioner of Income Tax, Delhi v. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC) : 2010 TaxPub(DT) 1335 (SC).

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2008-09 & 2009-10

SUBSCRIBE FOR FULL CONTENT